Sunday, May 24, 2015

Modi visit to China - Looking ahead

Amb TCA Rangachari,

Distinguished Fellow, VIF

Given the perceptions of a Janus-like character of India-China relations, it is well-nigh impossible to escape the past. Nor does one need to, considering the rich historical and cultural legacy that the two peoples have inherited. In the words of the late Chinese Indologist, Professor Ji Xianlin, India and China are天造地设(Tian Zao, Di She) (“Created by Heaven, Constructed by Earth”). Thus, the past will remain ever present in our current and future dealings. But do we have to be imprisoned in, or by, the past?

Most projections suggest that by 2050 – perhaps even by 2030 – India will emerge as the third, if not second, largest economy in the world. China which is already the second largest economy - with an estimated GDP of USD ten trillion - will move ahead to the first position. Together, China and India are expected to account for a third or more of the global economy. This imposes a particular responsibility on both countries to find ways of working together. The much talked about ‘Asian Century’ will otherwise remain a dream. Neither the ‘Chinese Dream’ nor the ‘Indian Dream’ will translate into reality. As the Prime Minister put it during his visit to China, “the prospects of the 21st century becoming the Asian century will depend in large measure on what India and China achieve individually and what we do together.”

The former Prime Minister, Dr Manmohan Singh, said repeatedly that India needed an investment of US$ 100 billion annually over the next ten years for its infrastructure requirements. The one country that can be a possible source for such large funding is China, itself seeking to find productive avenues for profitable utilization of its massive reserves of (approx.) US$ 4 trillion. (The “One Belt, One Road” proposal of Xi Jinping which has been declared the ‘diplomatic priority’ for 2015 is a case in point. Chinese analysts see the willingness to finance the connectivity envisaged under this project to be at least partly driven by the imperative of maximizing utilization of over-capacity in several industries like steel, cement, ship building etc.) According to a Wall Street Journal report last year, China officially held (approx.) US$1.27 trillion of U.S. debt, about 10.6% of the $12 trillion U.S. Treasury market. A somewhat lower figure is held in Euro debt. The yield on these holdings varies anywhere from a little over 1% to 3%. The returns on investments in India might well be more favourable. The signing of 26 MoUs/ Agreements, during the Prime Minsiter’s visit, valued at US$ 22 billion and encompassing multiple sectors including renewable energy, power infrastructure, steel and small and medium industries suggests that Chinese investors endorse this reality.

Seen in this context of current and future needs, India and China have a rare synergy where mutual benefit – the fourth of the Five Principles of Panchsheel – underpins the logic of closer cooperation. True, the declaration of intent has to manifest itself in actual action on the ground. The Prime Minister showed awareness of this in acknowledging that “rewriting policies can be easier than changing mindsets and work culture.” But, as he noted, “we are on the right path.”

The synergy of economic cooperation does not, by itself, erase the bitter legacy of the past nor does it build the trust and confidence the need for which the leaders of the two countries have - repeatedly and publicly – stressed. During the talks, Xi Jinping spoke of the need for “joint efforts to increase mutual trust between the two countries, managing differences and problems, by avoiding interference in overall relation between two countries.”

China’s relations with Japan and the US are good examples to learn from. Booming economic cooperation co-exists – often not very peacefully – with abiding tension; public accusations and condemnations of attempted ‘containment’ or ‘encirclement’; periodic belligerence; and, induced public antipathy. China is wary of India being drawn in too close to the US and Japan. The pattern of the relationship with India is unlikely to be vastly different though given the capability and potential of India, its proclivity for pursuing an independent policy, and the perceived necessity of preventing India from getting too close to the US or Japan, China is more likely to pursue possibilities of keeping the relationship from becoming too prickly. (According to the findings of a survey conducted on 14 May 2015 by Huanqiu Shihbao (Chinese version of the Global Times) with 2174 respondents, three fourths of whom were in the 30-60 age group and were University students, on the visit of the Indian PM to China, nearly 80% felt that in future India’s Comprehensive National Power will not surpass that of China.)

The unresolved border issue is emotive. But it is unrealistic to expect that it is amenable to a quick-fix or to assign to it the role of a litmus test for judging success or otherwise of the visit. How realistic is it for India or China to attain the full extent of their claims? If that is not an option, how willing and capable are one and the other side to compromise, and to what extent, to reach a settlement? On the Indian side, how likely is any territorial ‘adjustment’ to pass muster with constitutional requirements and obtain public endorsement? In the absence of conducive factors essential for finding acceptance for a ‘settlement’, is the best option not to keep reiterating our view and hopes for an early settlement while we focus on our own much needed developmental and reform goals?

That such reiteration has been done with clarity and persistence was conveyed publicly by the Prime Minister when he said “I stressed the need for China to reconsider its approach on some of the issues that hold us back from realizing full potential of our partnership. I suggested that China should take a strategic and long term view of our relations.” On his part, Xi Jinping also spoke of “China-India bilateral relation should be treated from the viewpoint of strategic level and from long term development prospects.”

Specifically, on the boundary issue, the Prime Minister stated “On the boundary question, we agreed that we continue to explore a fair, reasonable and mutually acceptable resolution. We both reiterated our strong commitment to make all efforts to maintain peace and tranquility in the border region. I found sensitivity to our concerns on this issue; and, interest in further intensifying confidence building measures. I also reiterated the importance of clarification of Line of Actual Control in this regard.” “I found the Chinese leadership responsive.”

It is well known that on many international and multilateral issues, India and China have similar approaches. True, there are some issues of particular concern on which China’s position is not fully in sync with ours despite their experience not being dissimilar. There is no indication of support, for instance, to India’s position on Pakistan as a sponsor of cross-border terrorism or PoK being included in the route of the proposed CPEC project to link Gwadar with the Karakoram Highway. It is not that the China is unaware of India’s concerns and sensitivities in this regard. That it chooses to disregard them is a pointer to the continuing need to address them and find resonance. Similarly, the lack of endorsement of India’s candidature for permanent membership of the US – remote though the UNSC expansion remains – and continuing consideration to India’s NSG membership require a change on China’s part for which India will have to continue to work.

There is much else on the substantive side bilaterally that should make the visit an opening for a more cooperative future. The growing trade deficit; promoting people-to-people contacts for better mutual understanding; structured State and Provincial levels exchanges; expansion of sister-city relationships; educational and cultural linkages; opening of a new consulate; bringing together thinks tanks. These initiatives might well take some time to materialize to their full extent but when they do, they will surely make their contribution to expanding the scope of the relationship.

India should not also brush aside the protocol courtesies extended to signal that India and the visit were special. For the first time, a visiting dignitary was received outside the capital and that too by the President of China and General Secretary of the CCP. Even US President Clinton who visited Xian in 1998 was not thus received.

The Prime Minister’s own assessment of the visit is that it was “very productive and positive”. The follow up has to ensure that it is built upon and the basis for an enduring partnership is laid to reinforce the growth path that India has set for itself. Synergies for that exist. Simultaneously, synergies have to be built up for trust and confidence that could lead to the realization of the ‘interconnected’ Indian and Chinese dreams and fulfill the promise of the Asian century.